Jamie Dimon Gets Defensive, Curses When Asked About London Whale

Jamie Dimon CEO of JPMorgan Chase & Co. (NYSE:JPM) spoke at a Morgan Stanley conference today. The questioner got into the London Whale incident and Jamie Dimon got a bit tense. Although it was blocked out from the transcript, Jamie Dimon appeared to curse at least one point on the call. Below is a portion of the transcript where Jamie Dimon is asked about the London Whale.

Okay. So switching gears to management, you talk about some of the recent management changes that you have made. You have a new head of North American CIO division and obviously you have kept consumer group under Gordon and you said in the past that this is one of the best management teams that you have ever had. Could you give some color, explain why — what makes this group so special?

Jamie Dimon – JPMorgan Chase & Co. – Chairman and CEO

It was a little more than normal turnover. If you take my direct reports, two people left specifically because of the whale and some of them were just normal organizational stuff so Gordon, we had told you all that Gordon and Todd when we put this business together, they would be co-CEOs.

It probably happened a little bit sooner but it happened sooner because it was working not because of any other reason. Todd is still with us by the way. He is an outstanding individual. He is doing a lot of great stuff for Gordon and for me.

CIB was also the same thing and some with succession. The people — some people were not going to be my successor and you would say to me it is the opposite of what the press reported a little bit. You would say it is incumbent upon you to make changes to make sure you are training people to be your successor. You can’t have any blocking.

The other thing about the turnover which is really important if I were you — if you were at a company and the people who got promoted or got the new jobs were people you knew and respected and they were well tested, well trained and they have been doing a big chunk of the job already and the company knew that, that is very different than changing people and having a whole new bunch of new people in there.

So Marianne Lake was already had been controlling IB through the crisis. She had been the CFO of the Consumer Bank. She got bumped upstairs and then you will eventually evaluate the quality of the management team.

Mike Cavanaugh had already been running T&SS. He got bumped upstairs to be co-Head of the CIB as we put it together. Daniel Pinto had been running with Matt Zames, Global Fixed Income and he got bumped upstairs. Matt Zames as some of you know, is an extraordinary talent. These are all extraordinary talents of people in terms of character and capability and it is a great team and eventually the analyst will say this is a great team. And these are the same people that have been delivering all these years by the way. These are not unknown quantities, these are known quantities.

It is a little bit different when you are in that very visible seat that they now all have. The Board obviously is always thinking about succession planning. Do you feel like if the proverbial bust happened, is there somebody in this group that could step up?

Jamie Dimon – JPMorgan Chase & Co. – Chairman and CEO

Yes and that is the Board’s job but yes. The Board talks about succession and wants to know about succession. They meet all of these people, they know them all and while there are more visible people — Marianne, Dan Pinto, Mike Cavanaugh, Matt Zames, Gordon Smith were all in major critical jobs at the biggest financial crisis of all time. They have no problem dealing with their jobs today, like zero.

Betsy Graseck – Morgan Stanley (NYSE:MS) – Analyst

All right. Going to turn to some regulatory discussion and then we will flag the audience to see what kind of questions are on your mind so start thinking about them.

On the regulation, there has been obviously a lot of different chatter coming from different folks like FERC and [CFCB], etc. on a variety of different topics. And some of the things that investors kind of ask me is this doesn’t feel like the JPMorgan Chase & Co. (NYSE:JPM) that we know. And the underlying question is are you pushing too hard to get the growth that you have been delivering?

No. Look, I think we fell short in some of these things so when you get consent orders and you get complaints from regulators and separate some of the litigation that I will go back to in a second — we looked. It was true. Management is supposed to recognize when they fall short in something.

We still have this great wonderful company. If you travel around the world with me, we are on the ground in 60 places.
I was recently in Saudi Arabia, Paris, all through Asia. This is a great company. We do a great job for clients, communities, citizens, veterans, governments, sovereign wealth funds and we have some of these problems. That is life. I have always had problems in some places or another. I wish they weren’t in regulatory and we are going to fix them.

So we have taken some of our best people and we have given them command and control authority. We have staffed them up and we are going to fix every single last one of them both to our standards and the regulatory standards and we are going to get it done as rapidly as we can. We are already knocking a lot of it down actually not just having plans but changing policies, procedures, building technology and all of the stuff like that.

So I am completely comfortable we will get that stuff done and we are still continue to serve our clients. But one doesn’t necessarily have that much to do with the other. Some of these other things which people — particularly when we have Chairman CEO fight, people just come to — I can’t go to each and every one.

We just (inaudible) some of them. Every now and then believe it or not the government wants to come after a company and they are wrong. You know that, right? Okay.

Some will fight, some will settle, some — the allegation sometimes sound terrible but you go through the facts and you say boy, that seems a little bit blown out of proportion to me. So we will deal with those in due course.

When you have something like by the Whale by the way because it — [one paper came to a point] (inaudible) — well it is true but it is all of the people look at the same issue and they are supposed to, that is their job. When they think there might have been something that was wrong that is what they are supposed to do.

I have to confess I am a little surprised there is eight of them, in the old days it would be like one or two but that’s the environment we live in now.

One other question that we get a lot from investors is how to think through the different kind of information that is coming out on the Whale.

Obviously the Board put out their report, management put out its report and then we have the Levin report as well. And so just want to get your understanding as to how you think through what the different reports are saying?

Jamie Dimon – JPMorgan Chase & Co. (NYSE:JPM) – Chairman and CEO

I’m not going to specifically go through each one of these things but when we announced earnings on April 13, no one at J.P. Morgan Chase, no one, not one single solitary person from CIO to Risk to Finance to myself and a lot of people looked at it thought we had a big problem. We knew we had a small problem. So some of the differences they knew. So there is an email from a trader saying we have a problem. Yes, but they thought it was a $300 million problem not a $6 billion problem. And so that is not semantics it is just what do you mean by problem?

So we wouldn’t have said on that day that we didn’t think it was a problem if we thought we had a problem because a mere month later we said bad strategy, badly vetted, lost $2 billion — we have not lost $2 billion on the earnings date and on May 10, we told people what we knew. I mean I don’t know what more I can say. Bad strategy, badly vetted, badly monitored, badly controlled. Embarrassing. Terrible. Sorry.

I could give you the ugly details behind all of that but badly reported means reporting wasn’t right. Badly controlled means the control which has more limits in there — badly — and I said the risk (inaudible) function [properly] and a whole bunch of different stuff and we came full kimono. That is what we did.

Then there were issues about what we told the regulators we did. We tried to tell them but we didn’t know ourselves sometimes. The model. There is this obsession on the model. Yes the model got changed and it got changed back and we disclosed that when we changed back. As it turned out, even today the facts are moving around a little bit which one was more accurate. But I am comfortable that we did everything — I really said if you were in the meetings — I sat in those meetings myself and said make believe the Pope is over here and the Chairman of Securities & Savings over here — what is the right thing to do and that is what we are going to do.

You have got millions of people second guessing what happened after the fact. But we did everything that we thought was the right thing to do.

There was no hiding, there was no lying, there was no bull-(expletive) period. But we were wrong about stuff. So — and people thought X and maybe it was Y and they said Z and maybe that is what happens. People are human beings but nothing was done that was deliberate in any way, shape or form. I am completely and still totally comfortable about that.

Okay, great. So I think we answered that question that is on people’s minds.

Jamie Dimon – JPMorgan Chase & Co. (NYSE:JPM) – Chairman and CEO

Just so you know, I asked at the time — why don’t we just go ask the SEC for guidance like what do we do? Should we do this, even when we did the restatement in July, that was another one on July 13, there were still people saying well, it is immaterial, you shouldn’t be doing that because you are moving earnings back. You are going to make the second quarter better at the expense of the first quarter.

I was like whatever is the right thing to do, I will do. To me, doing the right thing is far more important. I didn’t mind restating. It was what it was. It was okay. We were going to survive. I just want to do the right thing. So I tell people in the old days, you used to be able to get guidance — you probably are all too young to remember that. You used to be able to go to people and say we had this issue. Here is the facts as we know them, what should we do? But you can’t do that anymore. It is much more fun to second-guess and so —-.

Betsy Graseck – Morgan Stanley – Analyst

All right.

Jamie Dimon – JPMorgan Chase & Co. – Chairman and CEO

And anyone who sues, we are going to fight that one to the end too by the way so keep that in mind.

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